Aussies compensated for dodgy financial advice

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The Compensation Scheme of Last Resort (CSLR) made its first payments to four victims totalling more than $360,000, three of which related to bad financial advice.

One payout of about $145,000 related to inappropriate personal financial advice provided to a victim from Sydney.

The Australian Financial Complaints Authority (AFCA) found the fraudulent adviser provided deceitful advice and convinced the victim she was investing in a property that was to be built. The adviser stole the money and fled the country, leaving her and her family in a difficult financial situation that led to applying for a financial hardship loan to meet their mortgage repayments.

aussies receive compensation from cslr for dodgy financial advice

Another couple from Sydney's Hills District was paid $150,000 in compensation after receiving bad superannuation advice.

AFCA found the advice was not tailored to reflect the couple's circumstances or goals. The adviser also poorly explained the risks failed to consider alternatives.

A man from the Northern Beaches received about $17,000 in compensation after taking out a large loan on the advice of his accountant to invest in a scheme he was told had "guaranteed returns".

The claimant invested $200,000 he believed was allocated to international bonds. After the first year, he stopped receiving payments and did not hear from the company's managing director.

More than $50,000 was paid to a couple from Queensland who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances.

The victims exhausted all other avenues and waited up to five years for a resolution.

CSLR chief executive David Berry says while the financial services industry works toward the betterment of their clients, it's unfortunate that there are a small few who take advantage of the trust bestowed on them.

"Ensuring some basic consumer protections works to lift trust in the financial services industry and the professions that support it. This crucial safety net for victims of financial services misconduct is now in place and those who have experienced financial loss through no fault of their own are being compensated," he says.

The CSLR provides up to $150,000 in compensation to eligible consumers.

"It is important to note that the vast majority of people in the financial services industry act ethically and in the best interests of their clients," says Berry.

"The CSLR is a genuine last resort for misconduct only, not for poor performing investments or people who ignore good advice and take undue investment risks."

This article first appeared on Financial Standard

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Karren Vergara is a financial journalist with Financial Standard, covering wealth management, including superannuation, banking and financial planning. Prior to becoming a journalist, she was an accountant for more 10 years. She has a diploma in journalism and Bachelor's degree in business, both from UTS.